It is a matter of great concern that after the Constituent Assembly (CA) election, we have entered into an uncertain budgetary regime with no budget presentation and approval by the legislative parliament as per schedule. Such an absurd regime has additionally aggravated or deepened the crisis in the economy amidst too much hardship faced by the people contrary to high hopes and expectations in the changed political milieu.
However, notwithstanding the pressures, more debates and discussions from two major interrelated political economy considerations is needed. One, should we encourage a system of bringing a full-fledged budget by a caretaker government that by definition has neither authority nor future accountability? Second, should we consider budget simply a ritualistic document that too at a time when the economy is in doldrums due to complete negligence despite pledges that economic transformational agenda would be consistent with ongoing changes in the state system?
The most worrisome phenomenon at the moment is that there is growing asymmetry between the changes that have already taken place in the state superstructure and the economy. The expectation that there would be changes in the economic sphere along with changes in the state system is proving to be futile. The irony is that in many economic fields and areas, the situation has recently worsened sharply with interplay of economic relations at the base working against downtrodden and deprived people, among others.
In view of the fact that the current caretaker government is pursuing an economic policy that is totally out of sync with the changed political course, it will be a big mistake to authorize it to bring out a full-fledged budget.
It is now well-recognized that economic structures and institutions greatly matter and hence without giving due consideration to them, market-based policies simply distort the outcomes or become irrelevant. The history of many countries has additionally proven that absence of changes in path-dependency syndrome or inducement to inequality-enhancing economic system obstructs the dynamics of growth and development. It is also an irony that since quite some time conspirers within the caretaker government and outside are busy blocking reforms and changes in the economic sphere aimed at making it in sync with the ongoing political change. This is very dangerous and may widen social conflicts and pose a threat of counterrevolution. The budget of the last fiscal year is a vivid example of such a perceived phenomenon or behavior.
It is needless to point out that the budget is the only document, which is considered trustworthy, having provisions that can be transformed into action. However, it is a matter of concern that even after such big political changes, most of the budgetary processes, patterns and institutional arrangements adopted in last year’s budget were the same as pursued during the early 1990s. Last year’s budget was, indeed, fully status-quoist, and hence was contrary to pledged commitments. More interestingly, despite the failure of neo-liberalism-led policies as evidenced by the worldwide financial crisis, our last budget still adhered to those policies. Perhaps, this was the reason for not even perceiving the necessity for coming up with stimulus programs and policy measures to prevent a likely financial sector-led crisis despite calls from various quarters on logical grounds.
After 25 years, a serious crisis manifested in both current and capital account, compelling Nepal to negotiate Rapid Credit facility (RCF) with the International Monetary Fund (IMF). In the absence of preemptive measures as in other countries, a grave crisis was faced by the financial sector with spillover effects on the entire economy. External dependency has increased in such a way that to fund external deficit has become a serious problem amidst evaporation of exports. One can only imagine what would have happened if there were no massive inflow of remittances. Again, Nepal is in a process of negotiating another RCF with the IMF. Although some reduced deficits are now visible on the external front, the factors of some relief do not show any sustainable positive trends. Current account is on the rise as can be seen when one compares the data of the first month of this fiscal year with that of the same month last year. At the same time, the sharp rise in food prices is continuing to have adverse impact on the livelihood of the common people. Indeed, a stagflation-type of situation is perpetuating. Moreover, it is preposterous as to why this government is now concentrating on raising the prices of essentials by completely ignoring resource efficiency and better management issues. This is true in case of, among others, electricity tariffs and fertilizers that will in all likelihood put more pressure on prices in the coming months.
The foremost problem with this caretaker government is that from day one of its formation, it never functioned in a credible way. Not even a limited accountable system was followed. Simply for its longevity, it broke records in terms of malfunctioning and corruption practices. Many ministers never followed minimum ministerial norms. After referendum, it is only during the tenure of this government that valuable trees have massively been destroyed in both the Tarai and inner-Tarai. Billions of rupees were transferred in a non-transparent way to the ministries and departments, which in addition to completely jeopardizing the public expenditure management system led to worsening financial discipline. Had the Commission for Investigation of Abuse of Authority and Public Accounts Committee not intervened, the situation would have been worse.
In view of the fact that the current caretaker government is pursuing an economic policy that is totally out of sync with the changed political course, it will be a big mistake to authorize it to bring out a full-fledged budget. Equally importantly, easily passing the budget may lift pressure from the political parties to reach a consensus, thus adversely impacting the constitution-drafting and peace-building processes as well. The urgency of consensus may also provide a scope for forging a minimum understanding on some key contentious economic policy issues so that economic agenda too could receive top priority along with political agenda.
It is amply clear that only political gimmick without due attention to the economy in general and livelihoods of the people in particular may lead to chaos. It is also ridiculous that a party that claims to be the champion of democracy is rejecting people’s mandate and discarding new initiatives of other parties toward early government formation. Unless this unjustified stand is changed quickly, this may not only delay the passage of the budget but also derail the constitution-writing process.
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